The Moratorium on Evictions – What Should You Do?

In March, the government announced a six-month moratorium on evictions for financial hardship due to the pandemic, which had both renters and owners considering their options.

Love & Co has a look at some of the important considerations about these difficult times, and the best way to tackle them.

Protecting Both Parties

It was expected that with the economic impact of the unprecedented global pandemic, renters and homeowners were going to feel the crunch. With rent or mortgage payments making up a massive percentage of most people’s living expenses, a downturn in income was always going to affect the rental sector, both for renters and investment property owners.

For commercial property owners the story is the same – many businesses have been forced to close or reduce their operations, leaving them short when it comes to rent. It’s in both parties’ best interest to keep those tenants on, and in fact it benefits the wider economy – businesses that shut down due to financial hardship are no longer able to employ workers, which just escalates the problem further.

The concept of lazy tenants and greedy landlords is very unhelpful in this scenario – it’s in everybody’s best interest for tenants to be able to pay their rent, for landlords to be able to pay their mortgage, and for the Australian economy to get back to a new normal as soon as possible. However, rather than mandate what everyone has to do, the Australian government has left it largely up to the involved parties to negotiate for themselves.

Planning Ahead

We truly have no idea what the future holds, some people are living off savings while others are relying on extra government boosts to JobSeeker payments. Tenants who have until now managed to keep up with rent could potentially begin to fall behind, and need to rely on that moratorium to ensure they keep their current living situation.

The moratorium on evictions doesn’t mean a blanket ban on evicting anyone, it refers to failure to pay rent due to financial hardship relating to coronavirus. It also doesn’t mean that tenants are exempt from paying. The idea is that tenants request either a reduction in the rent or deferred payments to help them get by. Then, when the moratorium is up, tenants will be required to fulfil their financial obligations to the owner.

For owners, the major banks have agreed to support mortgage holders with a mortgage holiday, meaning a freeze on payments. However, that doesn’t mean a freeze on interest, which will need to be caught up on at the end of the payment holiday. It’s a good temporary strategy to relieve the financial burden, but it doesn’t provide a long-term solution for home owners.

What Can Be Done?

We can’t guess what will happen or whether other support measures will be put into place, so for now we’ll need to hold on and work with what we do know. The key to getting through the effects of the pandemic has to be communication and mutual empathy.

The vast majority of tenants place their rent as one of the highest priorities, so most of those requesting assistance are experiencing unexpected and desperate financial hardship. Communication is important, as the uncertainty as well as the difficulties with negotiation have put tenants who are truly struggling in a very difficult spot.

On the other hand, most homeowners are regular people who have invested, and are also relying on their rental income to get through. Their banks are going to begin asking for their payments, plus extra for the interest on the payments that have been missed.

So what can be done? Negotiation is going to be key. Many landlords will have Landlord’s Insurance, although they must be careful as some financial solutions between them and their tenants can affect their claim. They will also have to be proactive in discussing their situation with their bank. Tenants have to be open and honest about what they can afford, and truly prioritise paying as close to their agreed rate as possible.

Having a good property manager becomes even more important in these stressful times, as a neutral third party who can assist both groups to reach the best outcome possible. Be sure to speak to one of our team members at Love & Co about how we can help you to get the most out of these difficult times.